RBS fined $612 million by regulators for manipulating Libor

Royal Bank of Scotland Group Plc, Britain’s biggest publicly owned lender, will pay about $612 million in fines for manipulating interest rates, the second- largest penalty imposed in a global regulatory probe.

The lender will pay $325 million to the U.S. Commodity Futures Trading Commission, $150 million to the Department of Justice and 87.5 million pounds ($137 million) to the U.K.’s Financial Services Authority, the CFTC said in a statement today. RBS said it will recoup about 300 million pounds to pay the fines by cutting bonuses and clawing back previous awards. The bank’s Japanese unit agreed to plead guilty to wire fraud as part of a deal with the Justice Department, the CFTC said.

“The public is deprived of an honest benchmark interest rate when a group of traders sits around a desk for years falsely spinning their bank’s Libor submissions, trying to manufacture winning trades,” said David Meister, the CFTC’s director of enforcement. “That’s what happened at RBS.”

The penalty is the biggest blow to Chief Executive Officer Stephen Hester’s attempt to overhaul the lender after it took 45.5 billion pounds from taxpayers in the largest bank bailout in history in 2008. The fine, the third to result from the global probe so far, exceeds the 290 million pounds Barclays Plc paid in June, and is second only to the $1.5 billion Switzerland’s UBS AG paid in December.

‘Selfish’ Culture

“Libor manipulation is an extreme example of a selfish and self-serving culture that took hold in parts of the banking industry during the financial boom,” Hester said in today’s statement. “We will use the lessons learned from this episode as further motivation to reject and change the vestiges of that culture.”

RBS rose 0.4% to 338.8 pence as of 1:09 p.m. in London. The shares have gained 17% over the past year. The U.K. paid the equivalent of 502 pence for the shares as part of the government rescue and British taxpayers own about 81% of the firm.

Investment banking chief John Hourican, 42, will leave the bank after handing over his responsibilities, RBS said. He will forfeit all his unvested bonus and long-term incentive plan awards that are subject to claw-back, the bank said.

“While John had no involvement in or knowledge of the misconduct, and very notable business achievements while in office, both John and the board felt it was right that he leave the organization,” the bank said.